African Nations Boost Gold Reserves Amid Geopolitical Tensions

African nations are increasingly building their gold reserves to hedge against geopolitical tensions that have weakened their currencies and fueled inflation.

Countries such as South Sudan, Zimbabwe, and Nigeria have either taken steps to increase their holdings or are considering doing so.

This move aligns with central banks in China and India, which have accumulated gold to diversify reserves and reduce dependency on the US dollar.

A World Gold Council survey indicates that about 20 central banks globally are expected to increase their gold reserves in the coming year.

“As a diversification strategy, that makes some sense,” said Charlie Robertson, head of macro strategy at FIM Partners. “While gold does not pay interest, unlike reserves held in US treasuries, this hasn’t mattered because the gold price has risen so much. It’s been a profitable trade.” The price of bullion has rallied 16% this year to $2,396.59 an ounce as of Monday.

African nations were among the hardest hit by the supply-chain disruptions caused by the coronavirus pandemic and the war in Ukraine, as well as a steep increase in global interest rates that led to a selloff in their currencies and stoked inflation.

Geopolitical tensions are again simmering with conflicts in Gaza, trade wars, and concerns over what a second term for Donald Trump as US president might bring.

South Sudan’s central bank Governor James Alic Garang reiterated over the weekend that the nation plans to expand its reserve base by adding resources such as gold. “We are in the stage of preparing policy documents and studying examples of other countries and lessons drawn,” he said.

The Bank of Uganda plans direct bullion purchases from artisanal miners to mitigate “the declining foreign-currency reserves and address the associated risks in the international financial markets.”

Its foreign-exchange reserves have been hit by capital flight following anti-LGBTQ legislation that prompted the World Bank in August to halt new financing to the East African nation.

Nigerian lawmakers are proposing that the central bank use gold to support and stabilize the naira and moderate inflation risks. The naira is the worst-performing currency against the dollar globally this year after the Lebanese pound, partly due to devaluations aimed at creating a free-floating currency.

Last year, the Central Bank of Madagascar moved toward domestic gold purchases as income from vanilla exports declined. In June, Tanzania announced it would spend $400 million on six tons of the metal.

Zimbabwe, which first introduced gold coins in 2022, launched a bullion-backed currency in early April to curb inflation and exchange-rate volatility.

Zimbabwe Gold, or ZiG, is backed by 2.5 tons of gold and represents the nation’s sixth attempt at a functioning local currency in 15 years, replacing the Zimbabwean dollar that lost 80% of its value against the greenback in 2024.

Governor John Mushayavanhu plans to ramp up reserves to over three tons this year and has stopped issuing gold coins, instead redirecting the bullion to the nation’s vaults.

Over the past two years, the World Gold Council has collaborated with central banks to structure domestic purchase programs from small-scale miners, according to Shaokai Fan, global head of central banks at the industry group.

“Central banks can add gold to their official reserves using their local currency, allowing them to grow reserve assets without having to sacrifice other hard-currency reserves,” he said.

Still, the gold rush doesn’t signal expectations that bullion will become a “liquid substitute” for dollars, said Hasnain Malik, emerging market equity strategist at Tellimer in Dubai.

“However, for countries taking a view that either the price of gold is going to go up, the price of the US dollar is going to go down, or their access to US dollars may be compromised by sanctions then increasing the allocation of gold in their reserves might make sense.”